SoCal Edison's 5.1% trust preference shares sink; FirstMerit sells upsized noncumulatives

By Stephanie N. Rotondo

Phoenix, Jan. 28 - "Everything was softer" in the preferred stock arena, a trader said Monday.

Another market source said that it was "not a very eventful day," adding that the market was down 1 to 2 cents generally all day long.

A trader noted that "small coupon utilities" were especially weak, pointing to Southern California Edison Co.'s SCE Trust II-linked 5.1% trust preference shares, which priced on Wednesday.

Meanwhile, FirstMerit Corp. said early Monday that it would sell noncumulative perpetual preferred stock. The deal came after the close, with $200 million of the 5.875% securities being sold.

SoCal Edison deal drifts

"Small coupon utilities" like Southern California Edison's recent SCE Trust II-linked 5.1% trust preference shares were under pressure in Monday trading.

At midday, a trader pegged that issue at $24.65.

After the close, a source called the paper down 15 cents at $24.57.

The issue priced on Wednesday and freed up on Thursday.

FirstMerit brings new paper

FirstMerit announced and priced an offering of 5.875% series A noncumulative perpetual preferreds on Monday.

The deal came upsized at $200 million from $100 million, and pricing was in line with talk.

As of midafternoon, a trader saw the issue trading at $24.60.

"More might be offered there," he added. He said the deal's gray market performance thus far was "not too good," remarking that it was a "small name with a pretty tight coupon."

As the market closed, another market source said he had not seen any markets since midday, when the securities were bid for at $24.65, with no offers.

"I'd be shocked if this thing did well," the source said, noting that the company's ratings - as well as the ratings of the new issue - held a negative outlook by both Moody's Investors Service and Standard & Poor's.

The agencies had placed the company's ratings on negative watch several months back after the Akron, Ohio-based bank holding company said it was acquiring Citizens Republic Bancorp Inc.

"The main bank is pretty good," the source said of the company. However, the acquisition will dramatically increase its size.

The source also said that the bank's expense base was "quite higher than it should be."

As such, he remarked that pricing was "aggressive."

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